Diversification, Investment Opportunity Set, Envinronmental Dynamics and Firm Value (Empirical Study of Manufacturing Sectors in Indonesia Stock Exchange)

Abstract

The purpose of this research are: 1) to describe and analyzing the diversification effect on firm value, 2) to describe and analyzing the role of Investment Opportunity Set (IOS) diversification effect mediation on firm value, and 3) to describe and analyzing the role of environment dynamics as a IOS moderating effect on company value. The research was conducted on the manufacturing sectors in Indonesia Stock Exhange. Observation period are 2006-2010. Based on defined population criteria the sampling method is saturated sample or census. The samples analyzed were 18 companies. Analysis data method is Structural Equation Modeling (SEM) variance-based namely SmartPLS. The result shows that: 1) The diversification effect on firm value is significant and positive, 2) IOS mediation variable significantly and positively affect firm value, and 3) IOS*environmental dynamics interaction variable does not affect significantly on firm value. Keywords: